Pradip Shah was flying high. In a mere five years he had transformed Credit
Rating Information Services of India Ltd. (CRISIL) from a novelty to a heavyweight
in the Indian and international financial world. The pioneering Bombay-based
agency had rated debt instruments of more than 800 listed companies, seen
its market capitalization soar from $ 1.3 million to $ 40 million and advised
Malaysian and Israeli authorities on setting up their own credit-rating agencies.
As Shah puts it, CRISIL had become "the largest rating agency east of the
Atlantic Ocean."

So it came as a surprise last year when Shah resigned from his high-profile
position as managing director. But the 41-year-old, who has a master of business
administration degree (M.B.A.) from Harvard University, got an offer he couldn't
refuse: the chance to launch U.S. investment guru George Soros's $ 35 million
Indocean Fund, which invests in Indian growth companies, and a salary-and-benefits
package worth over $ 300,000 -- a raise of more than 2,000 percent.

"A year ago one didn't hear of $ 200,000 salaries," observes Ravi Virmani,
managing director of Noble-Hewitt Associates, a Delhi- and Bangalore-based
human-resources consulting firm. "Now there are over 100 Indians in the $
150, 000 to $ 200,000 range." At least 50 companies in India are now considering
semi-annual salary reviews to retain talent.

It's a similar story -- though of varying magnitude -- all over Asia. The
region may still be a source of cheap labor, but salaries in managerial and
specialist areas are skyrocketing. Not surprisingly, as paychecks grow ever
larger, so does the complexity of compensation. In addition to traditional
perks like cars, housing and club memberships, benefits new to Asia, such
as stock options, are emerging.

Two factors have combined to drive up the price of Asian executives: scarce
talent and high economic growth. Despite the growing number of M.B.A. programs
around the world and local education systems stressing business, grooming
a new generation of top managers takes time.

The phenomenon of zooming salaries is particularly noticeable in financial
services. Booming stock markets, economic liberalization and the growing
need for complex financial products are creating a massive disequilibrium
in supply and demand for executives all over the region:

* In Indonesia, where per capita annual income is $ 650, traditionally submissive
executives are becoming more assertive. The head of an equity-research company
says salaries of $ 42,000 for young analysts are no longer rare, and some
are even getting signing bonuses from short-staffed brokerages.

* With one of the region's best-performing stock markets last year, companies
in the Philippines are having similar problems. When a Singapore-based brokerage
house set up shop there, it poached staff from existing companies, offering
what were rumored to be 100 percent pay increases. Says Rene Benitez, country
manager of brokerage DBS Philippines Inc.: "You have people talking themselves
up. Kids are earning 60,000 pesos ($ 2,500) a month, more than company vice
presidents."

The biggest winners in the salary stakes, however, are M.B.A. holders who
speak Mandarin. These executives can practically write their own paychecks.
Scott Gemmell, managing director of AsiaNet Consultants (HK) Ltd., a Hong
Kong-based headhunting firm, recently recruited an executive for a U.S. Fortune
500 company that wanted to open an office in China. The total package added
up to more than $ 700,000 a year.

If all this talk about higher salaries is music to the ears of senior managers,
many Asian companies don't like the tune. For one, it's getting harder to
hold onto good executives -- if you can find them. In India, for example,
executive turnover has risen to more than 30 percent a year. "The biggest
preoccupation among Indian managers today is, 'How do I accumulate wealth
and sufficient capital to be comparable to other Asian managers?' " says
Jamil Husain, managing partner of human resources in the Singapore office
of Towers Perrin, an international compensation consulting company. "Free
housing and servants don't matter anymore; he wants half a million dollars
in the bank by the time he is 45."

For many Asian executives, that aspiration is already a reality. As companies,
particularly in Singapore, Hong Kong, Malaysia and India, begin equipping
their offices with locals or Asian expatriates (often ethnic Chinese or Indians),
the once huge compensation gap between Westerners and their Asian counterparts
is narrowing fast. A perk like home leave is repackaged as a personal travel
allowance. And in Singapore and Hong Kong, because of the stratospheric prices
of cars (see box, page 34) and housing, companies are opting to give allowances
rather than a vehicle or apartment. Pay-referencing is no longer on U.S.
or U.K. standards, but on Asian ones.

As the profiles and importance of Asian executives rise, Western expatriates
find their value in the region is diminishing. Many of their postings are
being eliminated or their perks curtailed because of the availability of
more highly educated locals and younger, middle-management Westerners willing
to work on local terms. Many multinational corporations now use what compensation
consultants Organization Resources Counselors Inc. in New York City calls
the "earning power index," which bases pay at more realistic levels. "There
will be less imported talent in staff positions that are not profit centers,"
says Dilip Kothari, an American who heads Hongkong Bank's card-products center
in Singapore.

Many companies also are starting to examine just what it means to "reward"
people. For some personalities and in some national cultures, the best practice
may be to offer incentives other than cash. These might include opportunities
to travel, some decision-making powers or other kinds of recognition.

Furthermore, companies are realizing that some compensation schemes are out
of sync with corporate goals. For example, a managing director may demand
that his senior managers be more long-term focused. But if the bonus system
only rewards annual performance, the executives will be stuck in the short-term
view.

One compensation scheme widely used in the U.S. that promotes a long-term
outlook and loyalty is stock options. This benefit is just starting to make
its way into Asian companies, particularly those in countries with established
financial markets. Stock options work like this: An employee is granted the
right to purchase company shares at a certain price at a specified date.
If the company's share price rises, stocks can be purchased at the previously
established discounted rate and immediately sold for a profit. In most companies
that use them, stock options typically are only granted to senior managers
as an essential retention tool.

Ideally, stock options prompt top managers to think like owners because that's
what they are. They focus on activities that add value, expressed in higher
share price, to the company. They view themselves as part of a team and are
more likely to stay with the company because it usually takes one to three
years to exercise the option. Asian executives with stock options have two
advantages over Western counterparts: little or no tax on capital gains and
the ability to buy U.S.-dollar-denominated shares more cheaply when Asian
currencies appreciate.

Administering stock-option programs and other long-term incentive plans such
as stock appreciation rights (allotment of a certain number of shares over
a set period) and phantom stocks (a promise of cash or stock payment based
on future performance) can be complicated and cumbersome. Managers must have
a good grasp of the financial elements involved to take advantage of these
more sophisticated benefits. And for executives used to regular annual bonuses,
the gains from stock options may seem very distant.

But even the traditional bonus system -- up to several extra months of pay
each year -- is facing change. Some companies are moving toward rewards based
more on performance. This might be measured on an individual basis, or in
a consensus culture like Japan's, on team, regional or company performance.
But the stagnant Japanese economy has meant that many bonuses in that country
have been virtually nonexistent in the past few years.

China is at the other extreme. In a once staunchly communist country, where
fewer than 1 percent of the people are university-educated (although many
get on-the-job training), business leaders are hard to find. Companies --
domestic and foreign -- are fighting over the same small pool of managers,
and salaries and bonuses are soaring. This year alone, pay for Chinese managers
is expected to rise as much as 27 percent -- and that's betting on inflation
cooling to around 10 percent, from 25 percent in 1994.

But China's salary market is essentially a non-market. How else to explain
a system in which one company pays someone $ 10,000 annually and across town
a similar company pays another person with the same job $ 50,000?

"Nobody has any (human resource) information on China today," says Michael
Piker, regional representative of Organization Resources Counselors. Market
data for salaries are virtually useless because China hasn't had much of
a history of competitive pay. Furthermore, its employment market is moving
so fast that any information is out of date practically by the time it's
printed.

With few guidelines, foreign investors in China face the dilemma of how to
compensate employees, particularly young Western-educated mainland Chinese
returning home as executives. "People can't seem to agree on the amount of
premium to be paid for someone with Western training," says Eddie Franco,
a principal at Hewitt Associates in the U.S. who led a study of compensation
practices in China last year.

So far there is little creative compensation. Companies are often compelled
to base some bonuses on an average of all workers' efforts -- not the most
motivating exercise. "It can even be dangerous in some cases to give variable
pay," says Ivy Chow, the Beijing-based representative of headhunter Norman
Broadbent (HK) Ltd. "China's people are used to a stable system without surprises."

Nonetheless, extra benefits are becoming more commonplace and often necessary.
Managers, in the mainland and elsewhere, will behave in a manner that works
to their advantage. It is, after all, a sellers' market for executive talent.
As Pradip Shah discovered, salaries are going up not in percentages but in
multiples